Tanzania is not on track to meet its Millennium Development Goals target despite a growth record that – as reported – is impressive. Real GDP growth reached historically high levels between 2000-2006, yet this is set against only the slightest reduction in the poverty rate – from 35.7% in 2001 down to 33.4% in 2007

Atkinson, Anthony

Lugo, Maria Ana

LSE Research Online

22/06/2017 Measuring growth and poverty in Tanzania - IGChttp://www.theigc.org/blog/measuring-growth-and-poverty-in-tanzania/ 1/3Authors Anthony AtkinsonProfessor of EconomicsUniversity of Oxford Maria Ana LugoConsultantWorld BankPublished on: 7 Jan 2014Countries: TanzaniaResearch themes: State Measuring growth and poverty inTanzaniaTanzania is not on track to meet its Millennium DevelopmentGoals target despite a growth record that – as reported – isimpressive. Real GDP growth reached historically high levelsbetween 2000-2006, yet this is set against only the slightestreduction in the poverty rate – from 35.7% in 2001 down to33.4% in 2007.Indeed, ‘few adult Tanzanians think they are enjoying the fruitsof economic growth’ and ‘in all income groups … more peopleperceive falling rather than rising living standards’ according tothe findings of the Views of the People Survey in March/April2007 (Poverty and Human Development Report 2007).Interrogating the data is essential to understanding whyimpressive economic growth has not lead to a correspondingreduction in poverty. This is not only important to assessprogress, but also when considering how social objectives aretranslated into concrete measures and indicators.The first point to make is the importance of working with percapita figures. While the poverty figures depend onconsumption per person, the GDP statistics refer to the nationaltotal. Between 2001 and 2007 the population of mainlandTanzania grew by 16.5% (National Bureau of Statistics 2008).The increase in GDP per person was 29.9% – an impressivemacroeconomic performance that should have substantiallyreduced poverty. So we need to dig a little deeper to see what isgoing on.Our research shows that one of the reasons why rapid growthhas not had a larger impact on poverty is that the rise inhousehold consumption has not been equally shared (Atkinsonand Lugo 2010). However, this may not be obvious if you use arelative measure of inequality, as some have done. According tothis measure, if all consumption levels rise by the sameproportion one can conclude, as the 2007 Household Budgetsurvey did, that ‘inequality in the population as a whole hasremained unchanged since 2000/1’ (National Bureau ofStatistics 2009).However we argue that if we are concerned with the impact ofdistribution on poverty reduction, then it is more appropriate touse an absolute inequality measure. This means that a situationwhere inequality is stable would be one where all consumptionlevels rise by the same absolute amount and where the cost ofinequality is measured in absolute not proportionate terms.Taking an absolute approach highlights that inequality in22/06/2017 Measuring growth and poverty in Tanzania - IGChttp://www.theigc.org/blog/measuring-growth-and-poverty-in-tanzania/ 2/3Tanzania has grown substantially and that greater povertyreduction could have been achieved if the absolute increases inreal income had been more evenly spread. For example Figure 1shows that the bottom two poorest groups – largely consistingof those below the poverty line – had, on average, virtually nogrowth in per capita consumption. In contrast, the gain for therichest fifth of society is three times the amount that wouldhave been generated by an equal absolute increase in allconsumption levels.Figure 1. Absolute increases in per capita consumption byquintile groups There are also limitations in the definition of totalconsumption. There is, for example, a large difference betweenthe average rise in per capita consumption shown by thehousehold surveys and the rise in per capita householdconsumption recorded in the national accounts between 2001and 2007.We can explain some of this by looking at the constant pricenational accounts for Tanzania mainland in 1998-2007. Theseshow that household consumption fell from 62% to 54%, whilegovernment final consumption and gross fixed capitalformation rose by 3% and 4%, respectively. As a result, the risein household consumption expenditure per capita was 26%, 4percentage points less than the rise in GDP per capita.The fall in household consumption is even larger in the currentprice national accounts, where it fell from 62% to 48%between 2001 and 2007 (National Bureau of Statistics 2008).This highlights a key issue – the change in relative prices. Theprice deflator for household consumption rose by 42% between2001 and 2007, compared with much larger increases for othercategories of expenditure – 62% for government finalconsumption, 85% for gross capital formation and 83% forexports. This means that the increase in the deflator forhousehold consumption was 10 percentage points less than thatfor GDP as a whole.Given these types of discrepancy, we argue that there is a casefor downplaying a single measure of consumption poverty andfor considering instead a portfolio of deprivation indicators thatreflect specific types of consumption, notably nutritionalindicators, housing and durables, and those that reflect22/06/2017 Measuring growth and poverty in Tanzania - IGChttp://www.theigc.org/blog/measuring-growth-and-poverty-in-tanzania/ 3/3indicators, housing and durables, and those that reflectspending on health care and education. Such a portfolio would,in turn, highlight the key roles played, on the one hand, byagricultural production and, on the other hand, by publicprovision of health care and education, where issues of qualityand distribution are important. The portfolio could be the basisfor the analysis of multiple deprivation at the individualhousehold level, capturing the degree of overlap ofdisadvantage.We undertook an analysis to show how this could be done in amanageable way and the extent of progress in Tanzania in thethree areas considered. The results shows that between 2001and 2007, school attendance and ability of durable assets haveimproved significantly, whereas access to protected sources ofdrinking water has deteriorated. Despite the latter, thecombined effect reduced the proportion of Tanzanians whosuffer from any of the three forms of deprivation from 90% to80%. Equally, there has been a fall in the proportion deprivedon all three dimensions from 19% to 10%.While our analysis is purely illustrative, it indicates howmultiple deprivation at the household level can be incorporatedin a manageable way into the assessment of economic andsocial performance. We hope our research may contribute tothe establishment of goals for the next stage of the MillenniumDevelopment Goals and Tanzania’s national developmentstrategy (MKUKUTA). Further readingNational Bureau of Statistics (2008), National accounts ofTanzania Mainland, 1998-2007, Dar es Salaam.National Bureau of Statistics (2009), Household Budget Survey2007, Dar es Salam.Atkinson AB and Lugo MA (2010), “Growth, poverty anddistribution in Tanzania”, IGC Working Paper No. 10/0831.

Measuring growth and poverty in Tanzania

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